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James Pethokoukis is a columnist and blogger at the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews, the opinion and commentary wing of Thomson Reuters.

After Action Report: My Twitter tangle with Austan Goolsbeee

Yesterday afternoon, I wrote a blog post with this headline: “In 2003, Obama economic adviser Goolsbee said Bush ‘cooked the books,’ to produce a lower unemployment rate.” The post was based on a New York Times op-ed Austan Goolsbee wrote back in November 2003, “The Index of Missing Economic Indicators: The Unemployment Myth.” The main thrust of his commentary was that the unemployment rate fails to give a true picture of the health of labor market for the following reason:

The government reported that annual unemployment during this recession peaked at only around 6 percent, compared with more than 7 percent in 1992 and more than 9 percent in 1982. But the unemployment rate has been low only because government programs, especially Social Security disability, have effectively been buying people off the unemployment rolls and reclassifying them as ”not in the labor force.”

Goolsbee’s conclusion isn’t controversial. But several other bits really popped out at me and made me raise an eyebrow:

In other words, the government has cooked the books. It has been a more subtle manipulation than the one during the Reagan administration, when people serving in the military were reclassified from ”not in the labor force” to ”employed” in order to reduce the unemployment rate. Nonetheless, the impact has been the same. … Unfortunately, underreporting unemployment has served the interests of both political parties.

Phrases like “cooked the books and “subtle manipulation” certainly and genuinely prompted the question in my mind of who, exactly, was doing the cooking and manipulating and why.

Given that colorful language as well as a) the mention of what Goolsbee said happened during the Reagan administration, b) the fact that the Bureau of Labor Statistics is part of the Labor Department, and c) the Labor Department was part of the Bush administration, I concluded that the “government” Goolsbee was referring to was in fact the Bush administration and that its various units and agencies were undergoing a “subtle manipulation” to meet a political end. To me, that is what a plain reading of the op-ed suggested at the time. And that is what I wrote.

But Goolsbee says I am dead wrong and that is not what he was saying at all. Nor was he making any accusations about the 2003 Bush administration or the BLS as I said on Twitter as well. As Goolsbee said on Twitter: “My point was that depth of recession in 01-02 was missed by shift onto DI”. In other words, the piece was about why the unemployment rate is not an ideal measure of the full labor market situation that could be compared across long periods of time any more. An economic point, not a political one about some partisan conspiracy. Nothing more, nothing less.

Another bit from the op-ed is illustrative:

Unfortunately, underreporting unemployment has served the interests of both political parties. Democrats were able to claim unemployment fell in the 1990’s to the lowest level in 40 years, happy to ignore the invisible unemployed. Republicans have eagerly embraced the view that the recession of 2001 was the mildest on record.

The situation has grown so dire, though, that we can’t even tell whether the job market is recovering. The time has come to correct the official unemployment statistics to account for those left out. The government agencies that can give us a more detailed and accurate picture of the nation’s employment situation — the Census, the Bureau of Labor Statistics and the Bureau of Economic Analysis — need additional funds and resources from Congress to do their jobs.

Based on our Twitter exchange, I have no problem modifying the post to fairly express and reflect what Austan explains that he meant, particularly the bipartisan nature of the problem. (Indeed, the problem is an ongoing one even though the Obama administration.) And I have. The broader policy point about U.S. economic statistics is an important one and shouldn’t be muddied.

And now lets look at the track record as engineered by Romer, Gloolsbee, et al–what really happened. For those with an open mind and a functioning memory, much can be learned by comparing the very weak recovery from the 2007-2009 recession with the very strong recovery from the 1981-82 recession. Both recessions were severe, and U.S. history shows that severe recessions tend to be followed by fast recoveries, even when the severe recession is due to a financial crisis. But growth has averaged only 2.2% in this recovery while it averaged 5.7% in the 1980s recovery, some 2.6X greater. And most recently, that 2.2% growth is beginning to look like an attractive target compared to the recent rate to which we have slowed.

Much of the difference in growth can be attributed to the different ways in which we responded to the economic problems. Even the friendliest and most accommodative monetary policies in our history were overwhelmed by hostile fiscal and regulatory policies.

The remedy is simple…role back hostile, expensive and anti-growth regulations and include cut our marginal tax rates. We need growth incentives and we must eliminate growth barriers. We need to stop demonizing and punishing success while rewarding failure.

That’s the difference between our current flagging 2.2% and 5.7%. That’s the difference between Obama and Romney.